WEEKLY CHART BOOK 19TH MARCH 2012

TECHNICAL VIEW FOR SENSEX & NIFTY FOR THE WEEK STARTING FROM 19-03-2012

In one sentence I am BEARISH for the short & even medium term while BULLISH for long term but no buying entry until at least we get a good & solid BOUNCE which can last for medium term so a clear advice to exit longs.

The BEARISH VIEW will change if NIFTY CLOSES A WEEK ABOVE 5499 and this level is AS OF NOW it will get changed in future as markets gives us new levels to watch for long side entry.

More TECHNICAL DETAILS is here :

After a MASSIVE rally started from end of 2011, our markets are at a crucial juncture not only for the SHORT TERM but may be for the rest of 2012.

We still insist that we are very much clear in our mind about the long term INDIA GROWTH STORY being intact but we want to stress here that there are still hiccups and road blocks ahead of us before SENSEX initiates a move which will take it towards 43000+ levels.

Looking at the short and medium term possibilities, AN INVESTOR will have a better buying opportunity later this year BUT NOT NOW.

All the short term negatives on the chart will DISAPPEAR if SENSEX can close a WEEK above 18003 and IF NIFTY can close a week above 5463.

If this positive turnaround does not happen that we are in for a troubled time.

To understand the possible technical picture let us understand different moves of NIFTY for the past few months. NIFTY bounced back strongly from 4538 to 5640 from December 2011 now 5640 was the 61.8% retracement of the whole 2011 crash we hoped for a MAJOR TREND REVERSAL looking at the strength of that rally.

But price movement from there on in the last month suggests that there is now a strong possibility that the last rally has already ended and markets are going to see another stronger bearish trend.

Let us read what we said here on 27^th February

“WHAT NEXT ?

If on Monday both indices can trade above THESE GAP levels of 5460 and 18000 and then if they trade above 5537 and 18250 for an hour or so we may see an upside reversal.

The downside correction which has just started may unfold in an A-B-C ZIGZAG corrective before making an attempt to reach our SECOND MEDIUM TERM TARGETS 5947/19803 for 2012.

If the correction goes much deeper STRAIGHT AWAY we may see a little longer lasting CORRECTIVE in the form of a TRIANGLE with its first leg as the largest one and in that case the correction will last for a much longer TIME.

On the weekly basis 17300 is a very good support as this level was a strong resistance in bear trend now it becomes a support one more support is a low at 16828 and in a few weeks’ time if the recent correction continues, we advise to go long in this zone of 17300-16828 as from this zone there will be a strong bounce back.

For NIFTY this zone is 5195-5076.”

This was written when NIFTY was at 5402 it gave a real short term buying opportunity at 5171 and when NIFTY was at 5232 we had given a TARGET of 5455 as well also as NIFTY reached our TARGET but as SENSEX could not close above 18003 we had given a clear caution note that a LOWER TOP may be in the offing if NIFTY closes below 5438

That close came very next day and NIFTY closed below another crucial level of 5342 almost confirming a lower top.

We also said this on 27^th February

“TRY AND UNDERSTAND SOME BASIC TECHNICALS TO BE ABLE TO FOLLOW A TECHNICAL ANALYST

A ZIG ZAG PATTERN

I suggested here that SENSEX and NIFTY will unfold a correction (which seems have started) in a ZIG ZAG PATTERN here is a bookish description of a zigzag correction

Zigzag

The zigzag pattern shown in figure 7.21 is the most common correction structure

A zigzag can consist of one zigzag, a double zigzag, or, rarely, a triple zigzag. The zigzag belongs to the family of sharp corrections.

Rules and Guidelines

• A zigzag correction has three waves.
• Wave A is an impulse wave or a starting wedge impulse wave.
• Wave B can be any kind of correction pattern.
• Wave B is smaller than wave A.
• Wave C is an impulse wave or an ending wedge impulse wave.
• Wave C is not an ending wedge impulse wave if wave A is a starting wedge impulse wave.

 As EXPLAINED earlier on the above NIFTY CHART of 24^th February, the CORRECTION went underway in an exact manner.

We said” NIFTY WILL RESUME ANOTHER LEG OF UPMOVE FROM 5197-5240 “that leg has also came and finished at 5480.

Let us see how NIFTY has behaved and how we can predict possible move to come

5630

                              5499

                                        

                                    5317

               5171

We had seen a strong up move from 4538 to 5630 and looking at the selling pressure in end February; we said that a larger correction is on.

If we are in for a LARGER CORRECTION then the up move from 5171 to 5499 was ONLY a correction of the possible first leg of down move from 5640 to 5171.

In this case 5499 is a LOWER TOP now and we will see a minor bounce from 5171 around and then NIFTY will breach 5171.

When a lower top confirms one can’t HOPE for supports to work but should wait for ENOUGH TECHNICAL evidence that support has worked to enter longs.

Supports/targets are 5076 and 4977.

The projected move up to 5076 can be a SIMPLE ZIGZAG corrective or can be a part of COMPLEX corrective like a TRIANGLE, time will let us know about the future shape of correction to unfold.

But it is not a time to buy unless NIFTY closes a WEEK above 5463-5499 or if it finds a STRONG bottom at lower levels with a CANDLE REVERSAL PATTERN ON WEEKLY CHARTS.

SENSEX AND A PRICE ZONE :

At times when indicators seem to fail or when a channeled move seems not working charts can have some clues in a price zone.

Here is such an observation as shown on this weely chart of SENSEX .

One can see that the price zone of 17295 to 18000 has been seeing a lot of price action in terms of HIGHS and LOWS in the last two years.

After remaining below this zone for almost six months from July 2011, SENSEX briefly closes above this zone but very soon SENSEX is in the zone again.

Looking at the weakness on Daily Chart if SENSEX closes back below this zone on a weekly basis, SENSEX will again enter in an intermediate downtrend.

This zone of 17295 to 18000 is a STRONG TREND DECIDER ZONE may be for the rest of 2012.

One can see a lot of highs and lows in this zone of 5177 to 5399 for NIFTY and if NIFTY closes a week below 5177 the trend will become strongly bearish.

BULLISH hopes only if NIFTY can manage a weekly close above (close on any FRIDAY) 5463-5499.